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Alba Iulia
Wednesday, October 21, 2020

The 2021 Budget Reflects Total Failure in Economic Management by the PF Government

Headlines The 2021 Budget Reflects Total Failure in Economic Management by the PF...

The United Party for National Development(UPND) President Hakainde Hichilema has said that the national budget that was presented by the Finance Minister Hon. Bwalya Ng’andu, is worrying and a reflection of total failure in economic management.

Reacting to the Budget presentation made on Friday by the Finance Minister, the UPND leader said that it is shocking that the Minister of Finance plans to finance the 2021 budget through borrowing K51.6 billion (US$2.6 billion), representing 43.1 percent of the total budget.

“Of this K51.6 billion, the PF wants to borrow K27.7 billion or $1.4 billion from external sources, an amount equal to total interest payments on external debt and about the size of our reserves, ” Mr Hichilema wrote.

Below is the full post

The national budget that was presented by the Finance Minister Hon. Bwalya Ng’andu, the last of the PF Government, is worrying and a reflection of total failure in economic management. Firstly, the week started with the announcement that Zambia will not only fail to pay the first Eurobond bullet payment due in 2022, but is having challenges in paying the interest owing on Eurobonds up to April 2022, and calling on creditors for a meeting on September 28, 2020, to discuss the Eurobond debt service suspension.

Fair enough, this is a commendable effort to admit that things are not the way they should be, especially if it means we shall soon get on a program to live within our means as a country. Therefore, our creditors and the citizens expected that the budget would address how going forward, the government will be on course to make necessary adjustments to place the country on a path of sustainable debt, and ease the suffering of the Zambian people.

Shockingly, the Minister of Finance plans to finance the 2021 budget through borrowing K51.6 billion (US$2.6 billion), representing 43.1 percent of the total budget. Of this K51.6 billion, the PF wants to borrow K27.7 billion or $1.4 billion from external sources, an amount equal to total interest payments on external debt and about the size of our reserves. What this means is that, on the one hand, PF has hired White & Case LLP, a law firm, and Lazard Freres financial advisory firm, to help negotiate for the restructuring of the debt and suspension of interest payment, while on the other hand, seeking additional debt that will increase the publicly disclosed external debt to $13.4 billion.

Worryingly, the budget is shallow on specific measures to be implemented in areas of identified opportunity envisaged to deliver the recovery; case in point is how the citizens can take advantage of the continental free trade area and the industrial parks. Given the poor track record of the PF administration at the execution level, such lack of details spells doom on the horizon, and prolonged economic uncertainty if this government is given an opportunity to present another national budget.
Our other significant concerns on the 2021 budget are as follows:

  1. We are extremely concerned about the planned domestic financing of K17.4 billion, or 15% of the budget, and the consequences of inflation therefrom. With the change in Management at the Central Bank, there is a likelihood of a spike in the money supply, and inflation is very real. Excessive money printing risks bringing the much-dreaded situation of stagflation, in which we have both high inflation and low growth. Zambians need assurances that this will not be the case.
  2. Given that domestically generated revenue from Zambia Revenue Authority and other government agencies is a paltry K66.0 billion and yet to pay our public workers and service our debt, we need K74 billion, we have reached the point we feared most as a country. Simply put, we cannot pay our workers and debts without borrowing.
  3. Out of the K66.0 billion that will be generated domestically, PF is expecting to raise 5.5 percent or K6.6 billion of the budget through fees and fines – how can you run government expecting to make money charging those who drill boreholes because the government is failing to provide water, hoping your citizens can commit traffic offenses and other misdemeanors?
  4. Zambia Revenue Authority will start charging more for imported second hand cars, that they have decided to call high-value motor vehicles. They are back to that old system that they discarded. They have decided to exclude the so-called high-value motor vehicles from the definition of used motor vehicles, and adjust them to ad valorem import duty.
  5. While the budget has given K175 per month as a relief to lower-income earners earning K4,000, this cannot cushion the devastating impact inflation and depreciation of the Kwacha has had on the less privileged members of our society.
  6. We continue to argue that the PF has wrong priorities. We find it strange that the budget line for health was increased by only 3% in the middle of a deadly pandemic. Adjusted for inflation, the PF has reduced the allocation in real terms. Further, we also note that you set aside K202 million as gratuity for MPs. At the same time, we appreciate that they worked for this money, like many public servants that have not yet obtained their pension. A normal father will not ask his children to tighten their belts while he continues feasting. They can wait for their gratuity. Prioritize paying the outstanding pensions of those public servants who spent over 30 years serving this great nation.

We can point out further shortcomings in the 2021 budget, including the need to close the wastages and leakages through by-elections and corruption, we will leave it here for now. This budget doesn’t attempt to address the challenges our country is facing. We need to go back to the drawing board. Like the way we pointed out way before, that your careless borrowing was unsustainable, we stand ready to provide guidance on the economy to alleviate the suffering placed on our society.

27 COMMENTS

  1. THIS IS WHAT IS CALLED A KNEE-JERK REACTION FROM hh AFTER HIS CULT SUPPORTERS REJECTED HIS INITIAL POSITIVE RESPONSE TO THE BUDGET.
    hh DOES NOT CATALOGUE HIS CONTRIBUTION TO THE RUINING OF THE ZAMBIAN E ECONOMY.
    WHAT IS REALLY SHOCKING IS THE SIZE OF THE ZAMBIAN GDP AND HENCE BUDGET BECAUSE OF A WRONG ECONOMIC MODEL WHICH SHOULD BE OVERHAULED THROUGH A NATIONAL INDABA. CLEARLY hh IS NOT THE SOLUTION AS SOME SECTIONS OF THE COUNTRY THINK.

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  2. The PF have totally failed and have no clue on how to stop Zambias continued economic decline.
    Zambia has officially achieved junk status thanks to ECL and the PF

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  3. Guys HH is right…we are in trouble…we are using borrowed money to survive.
    Who will pay for that…Mr. Lungu should have not bought a jet with that borrowed money.

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  4. Zambia first those are my exact thoughts. It proves that we don’t have any credible opposition in this country. This joker hh praised the budget and then when his staunch tribal supporters and upnd diasporans castigated him for supporting our budget,he makes a 360 degree turn and criticizes. Very childish. He will never win the presidency.

    Meanwhile I have to say that tasilas wedding is definitely one of the best I have attended in a long time. I am not easily pleased but last night was amazing. Ba diaspora don’t be jealous because you are married to old wyt pensioners there for visa

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  5. Since when did Supreme leader HH of the UPND acknowledge the PF Government budget…. HH is a sadist who only thinks it’s him only who can fix the economy because he’s worshipped by the UPND danderheads and sycophants….

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  6. From his analysis of the budget i can confidently say HH is not an economic/financial analyst at all. An economic analyst not only points out areas of weaknesses but also provides tangible/workable solutions. HH has not provided any solutions to the budget weaknesses he has identified. Therefore his analysis is loopsided and cannot be relied upon. I have laughed at him when he says this is the last budget for PF, i wonder what makes him believe this. The man surely has no political eyes to see that the political landscape does not favour him looking at how miserable has been losing bye-elections. 2021 will be the repeat of 2016 election at a larger scale this time. TAKATEKEPO

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  7. That budget is only meant to try to see lungu past 2021…….no care for the country….

    And those boasting about tasilas wedding to that kasai should think of the millions of Zambians on one meal a day and without jobs….

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  8. Think of Bally like abricklayer who is walking in the neighborhood and looks at his arrogant friend Mr chapona building a house very badly..is it the duty of the passer-by to teach him the standards of brick laying??…it is enough for him to point out the wrongs..u are building a house that does not conform to the set standards of building..if u don’t believe him..feel free to continue building… Because a bad bricklayer always blames his tools and covid..a good one simply corrects the mistake when given the contract

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  9. The minister of Finance has presented a reasonable budget that is seeking to address funding challenges in this pandemic period of COVID19 Naturally traditional revenues from Zambia revenue authority are expected to be lower than usual reflecting the global and local business cycles lt’s very usual Now Without any bailout or facility from IMF and world bank $142m millions we received, you expect the minister to use more of those money market instruments in treasury bills and bonds to finance government operations Again it’s a good thing for a country like Zambia to use advisory services to restructure and reprofile the sovereigns debts especially those material Chinese loans with significant durations you can restructure into long maturities or even better concessional loans…

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  10. concessional loans and mitigate the revenues erosions due to COVI19 Now you should read the 2021 Budgets plans to the minister s presented plans in his post COVID19 ECONOMIC RECOVERY Plans for the period 2021 It has outlined and explained most of those points Asking for debt repayment freezing is a noble thing in the economies impacted by covid19 it’s not like outright cancellation that may reflect badly on your quality of your economies but although that is not good but given the impact of covi19 on our revenues and unlike Nigeria or south Africa that earlier had received financial supports ,it’s the best you will have Rating agencies have factored in those sentiments and impacts of covi19 on economies but our economy with this budget and economic restructure plans and debt…

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  11. it’s the best you will have the Rating agencies have factored in those sentiments and impacts of covi19 on economies but our economy with this budget and economic restructure plans and debt will rebound in 2021 to 3% and post favorable indicators will be reflected in ratings reports with tourism and copper commodities supporting the rebounds The debts freeze cancellations and revenue methods are all meant to help reach fiscal stability post covid19 and must be supported especially as in far they create and work the economies before durations and risks in debt markets reprofile READ THE BUDGET TO THE MINISTERS RECOVEY PLANS TO DEBTS RESTRUCTURE WEIGH THE RISKS AND AUGMENT REASONED ALTERNATIVES

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  12. PF has taken the Zambian economy down from 6.3% yearly growth to just 2% and high debts ,junk status ,growing poverty rate and huge deficits. Total failures .

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  13. presented a reasonable budget that is seeking to address funding challenges in this pandemic period of COVID19 Naturally traditional revenues from Zambia revenue authority are expected to be lower than usual reflecting the global and local business cycles lt’s very usual Now Without any bailout or facility from IMF and world bank $142m millions we received, you expect the minister to use more of those money market instruments in treasury bills and bonds to finance government operations Again it’s a good thing for a country like Zambia to use advisory services to restructure and reprofile the sovereigns debts especially those material Chinese loans with significant durations you can restructure into long maturities or even better concessional loans and mitigate the revenues…

    2
    2
  14. revenues erosions due to COVI19 Now you should read the 2021 Budgets plans to the minister s presented plans in his post COVID19 ECONOMIC RECOVERY Plans for the period 2021 It has outlined and explained most of those points Asking for debt repayment freezing is a noble thing in the economies impacted by covid19 it’s not like outright cancellation that may reflect badly on your quality of your economies but although that is not good but given the impact of covi19 on our revenues and unlike Nigeria or south Africa that earlier had received financial supports ,it’s the best you will have Rating agencies have factored in those sentiments and impacts of covi19 on economies but our economy with this budget and economic restructure plans and debt will rebound in 2021 to 3% and post…

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  15. An effective commentary should begin from the ministers budget and long-term plans on the underlying data and figures look at the global outlooks see the average annual growth rate say in Real Potential GDP Consider the revenues and simulate the taxes and see what shares of income could potentially be taxed at what See Bracket creep in the ministers budget If there was more playground for revenues mobilization including more of the only covid19 support of $142m from world bank and yet another IMF help the budget revenue sources could be expected to be modified to reduce exposure costs and reinvest more incomes to grow those sectors and ultimately result potentially in reduction of Primary Deficit

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  16. If all economic indicators are in negative and even before Covid came on the scene. And if all economic indicators are currently worse off than in the MMD days. Why are you refusing to be called failures? What logic are using for refusal to concede failure.

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  17. Zambians STOP this perception and thinking you have that the PF has failed and collapsed the Zambian economy. The PF does not care about the Zambian economy or creation of jobs. They don’t make any decisions based on what is good for the nation but on how to perpetuate their stay in power is what matters. The plan to default on loans they got doesn’t bother them. While all political commentators, economists and opposition politicians are busy with commentaries on how the economy is going to be affected, PF’s suspension of payments is purely to have money for campaigns and bribe the voters. More money in PF’s coufers to buy votes. It’s high time the opposition caught up and had some high profile credible serious intelligence inside the PF and the PF Government to stay ahead of the…

  18. I do not think they could potentially default on the euros bullet payment of USD 160 M Asking for those restructuring and new term sheets doesn’t mean failure I personal do not feel if it meant payment they would fail If someone is talking about discretionary and none ,the most important thing is to as about the potential revenues and financing those and the deficit with a long-term macroeconomic modelling beyond say 2021 always keeping the lead on deficit below 3% of otherwise combined national deficit [central and councils could be higher than say 15% if there was no share amongst police army education health and others during this COVID periods in which the economies have shrunk revenues fallen but yet expected risen Combined fiscal deficit arising from tax revenues, investment…

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  19. Well you need to restructure the debts or sovereigns and advisory firms financial and legal advisors like those mentioned there are useful in sovereign restructuring process because they act as principal interlocutors with the country’s commercial creditors guiding through the process. Like Lazard market’s familiarity is critically important regardless government has to implement
    implement an efficient and cost-effective financing strategy and keep the lead on borrowing control expenditure and grow the economy There is always the temptation to go for debt which might be socially attractive and forget about the future costs and impacts on local bonds markets which the financial strategies have to support

  20. You cannot do away with restructure interlocutors and there is a process in sovereigns restructuring isn’t very different from building the book Our focus for now should be to restructure those especially those G2O and Chinese continue with prudent debt management strategies, create deep liquidity in our domestic
    capital markets, to finance cheaper those the higher borrowing requirements keep the debt trajectory sustainable thoroughly important by , reducing expenditure and increasing revenue collection and most important of all looking for superior higher economic growth. in those revenue enhancing sectors in the medium to long-term
    To conclude the budget is well cast given the limitation and environments but support the debt restructure as its the best second to…

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